Centre Amends IT Rules 2021 To Regulate Online Gaming

Exercising power under Section 87(1), Section 87(2)(z) and Section 87(2)(zg) of the Information Technology Act it has amended the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (2021 Rules). In the Definition Clause, the definitions of ‘online gaming intermediary’, ‘online gaming self-regulatory body’, ‘online real money game’, ‘permissible online game’ and ‘permissible online real money game’ have been inserted. They read as under -

“Rule 2 (qa) - ‘online game’ means a game that is offered on the Internet and is accessible by a user through a computer resource or an intermediary.

Explanation.—In this clause, ‘Internet’ means the combination of computer facilities and electromagnetic transmission media, and related equipment and software, comprising the interconnected worldwide network of computer networks that transmits information based on a protocol for controlling such transmission;

(qb) ‘online gaming intermediary’ means any intermediary that enables the users of its computer resource to access one or more online games;

(qc) ‘online gaming self-regulatory body’ means an entity designated as such under rule 4A;

(qd) ‘online real money game’ means an online game where a user makes a deposit in cash or kind with the expectation of earning winnings on that deposit.

Explanation.—In this clause, ‘winnings’ means any prize, in cash or kind, which is distributed or intended to be distributed to a user of an online game based on the performance of the user and in accordance with the rules of such online game;

(qe) ‘permissible online game’ means a permissible online real money game or any other online game that is not an online real money game;

(qf) ‘permissible online real money game’ means an online real money game verified by an online gaming self-regulatory body under rule 4A.”

As per the 2023 Amendment, Rule 3(1) requires online gaming intermediaries to observe the due diligence requirements prescribed therein. The due diligence requirements have also undergone modification. The amendment contemplates the intermediaries are required to inform its rules and regulations, privacy policy or user agreement to the user to not host, display, upload, modify, publish, transmit, store, update or share any information that [Rule 3(1)(b)] -

1. is relating or encouraging online games that cause user harm [Rule 3(1)(b)(ii)];
2. is in the nature of an online game that is not verified as a permissible online game [Rule 3(1)(b)(ix)];
3. is in the nature of advertisement or surrogate advertisement or promotion of an online game that is not a permissible online game, or any online gaming intermediary offering such an online game [Rule 3(1)(b)(x)].

The intermediary is to periodically, and at least once in a year, inform its users of its rules and regulations, privacy policy or user agreement or any change in the rules and regulations, privacy policy or user agreement. The 2023 Amendment had added a proviso that if it is an online gaming intermediary who enables the users to access any permissible online real money game it should inform its users of such change at the earliest, and no later than twenty-four hours after the change is effected [Rule 3(1)(f)]. Similarly, online gaming intermediary who enables the users to access any permissible online real money game shall no later than twenty-four hours of the receipt of an order, provide information or assistance to the Government agency which is lawfully authorised for investigative or protective or cyber security activities, for the purposes of verification of identity, or for the prevention, detection, investigation, or prosecution, of offences under any law for the time being in force, or for cyber security incidents [Rule 3(1)(j)]. However, the order should be in writing and should clearly state the purpose of seeking information or assistance.

The online gaming self regulatory body is required to comply with the orders passed by the Grievance Appellate Committee and it should upload a report of the compliance on its website [Rule 3(7)]. As per the 2023 amendment, online gaming self regulatory body concerned is also required to follow certain additional due diligence under Rule 4. It should appoint a Chief Compliance Officer, nodal contact person, and a resident grievance officer. The concerned online gaming self regulatory body is to publish periodic compliance reports detailing the complaints received and action taken [Rule 4(1)]. A significant social media intermediary and an online gaming intermediary who enables the users to access any permissible online real money game is required to have a physical contact address in India published on its website, mobile based application or both [Rule 4(5)]. It should devise a mechanism for receiving complaints so that the complainant can track the status of the complaint [Rule 4(6)]. It should also have a mechanism to enable users registering from India/India users to voluntarily verify their accounts and pursuantly they are to be provided with a visible mark or verification [Rule 4(7)].

Rule 4A has been inserted, which envisages that the Central Government can designate as many online gaming self-regulatory bodies as it may consider fit to verify an online real money game as a permissible online real money game under the Rules. It enumerates the criteria for being designated as an online gaming self-regulatory body; and makes provision for suspension and revocation of the designation. Under the 2023 Rules, in order for the online gaming self-regulatory body to declare an online real money game as a permissible online real money game it has to be satisfied that—

(a) the online real money game does not involve wagering on any outcome; and

(b) the online gaming intermediary and such online game is in compliance with the other obligations including due diligence obligations under the existing rules.

An online gaming self-regulatory body may, initially rely upon the information furnished by the applicant for verification purposes and declare it as a permissible online real money game for a period not exceeding three months. In the said three months the online gaming self-regulatory body should complete its inquiry. Consequently, it is to declare the online real money game as a permissible online real money game or inform the applicant in writing with the reasons that such online game does not meet the requirements under the Rules.

The 2023 amendment has added new provisions with respect to verification of online real money games. The due diligence obligations would be applicable only after three months from the date of designating at least three online gaming self-regulatory bodies [Rule 4B]. However, the Central Government has the power to direct an online game to comply with the due diligence obligations prior to the expiry of the three months. It is clarified that certain obligations can also be bestowed on online games other than online real money games [Rule 4C].